Americans currently spend about $350 billion a year on physician services, according to the online publication Management Accounting Quarterly. In fact, that total makes up more than 15 percent of the nation's entire gross domestic product. Which, incidentally, adds up to a lot of working hours for people in the profession of accounting.
How difficult is it for accountants to keep track of all those figures? The answer "depends on your definition of accounting," according to Jim Stroud, a member of the healthcare consulting division of Warren, Averett, Kimbrough & Marino, LLC.
"If you're working strictly in the capacity of a historian, looking back to sum up numbers and put them in the proper categories on a tax return or a financial statement, it's fairly straightforward," said Stroud. "In fact, healthcare accounting can be simpler than for some other businesses, because you don't have inventory to worry about. Using cash-basis accounting, it's income when it comes in, and it's expense when it's paid out.
"But if your job is, instead, to turn and look forward and determine what all of that information tells you about a particular practice and how it can be better managed, then healthcare is a much more difficult field than many others. For instance, there's not another industry I know of where 'sticker price' is as meaningless a term. The medical field doesn't expect to be paid its standard rates, because you have insurance companies sitting in judgment of what those fees should be."
Another characteristic that sets the business of physician practices apart, Stroud said, is that "there's probably no other business where the owner is as singularly responsible for income generation, but the owners are the same ones who are attending to patients in the examining rooms or the operating rooms. The physicians are constrained by the nature of what they do to stay on this sort of treadmill of income production, and to stay on task at work.
"And all of this, despite being part of an industry that's probably second only to the nuclear power industry in terms of how heavily it's regulated."
Jerry Callahan, director of the Healthcare Services Group at Kassouf & Company, agrees that the devil is in the details … there's no shortage of details when it comes to financial management of a physician practice.
"Our medical practices face concerns ranging from human resources to employee benefits to a whole lot of regulatory issues, and each of these has specific aspects that a typical business doesn't have to deal with," said Callahan.
While the topic of shrinking reimbursements has tended to dominate conversations of healthcare accountants in recent years, Callahan believes the landscape is changing: "At least in Alabama, reimbursement has been fairly flat in the past few years," he said. "One hot topic more recently has been cost containment. And there's been an influx of ideas related to practices adding ancillary services such as digital X-rays, CT, and MRIs — diagnostic services that they formerly outsourced to hospitals and other entities. Likewise, many pulmonary physicians are looking at adding sleep labs."
"One of the biggest challenges to practices today," Stroud added, "is the growing portion of service fees that have to be collected from individuals. As employers are ratcheting down benefits, patients are having to pick up the difference.
"We do a lot of in-service training for our clients about the ways we need to work together, on the money side. Of course, our aim is to give great care, but when it comes to getting paid, we all have to do our best to collect the money the practice needs to stay in business."
Callahan believes that challenge will continue for the near future: "Back in the mid-1990s, the healthcare debate was about escalating costs as a sort of general concept. But with the explosion of diagnostic and imaging services, plus the general costs of providing care, there has to be a point where providing health insurance becomes more prohibitive. That means a lot more discussion about how healthcare is delivered, and how it's paid for."
November 2006
